In recent years, self-managed super funds (SMSFs) have become increasingly popular. Before the recent Great Recession, people would trust other people, so called experts, with their savings and investments. The goal of this was to have these sums grown to a significant amount for when they have retired.
The idea was that the people who knew about investing should be trusted with making the best decisions and therefore yielding the greatest return. However, most of these so called experts turned out to be wrong and often greedy. Many people saw their retirement savings wiped out as a result. Therefore, people know what to manage their own savings and investments. That is where SMSFs come in.
Here is some advice to keep in mind when setting up your SMSF.
Deal with a specialist
While this may sound very straightforward, you need to ensure that setting up a SMSF is the best option for your individual needs. Therefore, you should always consult with a finance fiduciary that specialises in retirement planning. They will look at your situation and recommend what the best route forward for you is. This is going to affect how much money you have when you retire, so you don’t want to make a decision lightly or without much thought to it.
Make sure you have the necessary time and skillset
In the beginning, it can be hard to set up your SMSF if you have no experience in the topic before. You cannot simply set it and forget it like a lot of other retirement products. You need to space out the time whereby you can manage the fund and make new investments and get away from underperforming positions.
You are the one responsible for the fund, so you need to have the relevant skillset. This may mean dedicating time to learning the features of the fund and looking into various industries and identifying potential investment opportunities. It is a constant commitment, as you need to stay on top of recent developments in the areas that you are reinvesting in. This is why it is important to have a solid and consistent plan in place to manage the fund. This means that you can commit to excellence over the long run and maximising your returns.
Choose solid trustees
When you are setting up an SMSF, you can have up to four trustees. You can use anyone provided that they are not already a trustee of another SMSF and have not had any legal financial trouble in the past. It is vital that you choose trustees that you can sincerely trust, as you are the one who needs to make sure than the fund meets all of the necessary law, regulations and compliances. Failure to do so could leads to financial troubles.
You should make sure that all of the trustees are crystal clear on your goals with the fund and have a comprehensive plan in place to follow. This minimises the number of mistakes or miscommunications that may occur.